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SUPREME COURT OF INDIA
DHANANJAYA Y. CHANDRACHUD, AJAY RASTOGI, JJ.
Managing Director Chhattisgarh State Co-Operative ...Appellant Bank Maryadit – Appellant
Versus
Zila Sahkari Kendriya Bank Maryadit & Ors. – Respondent(s)
Civil Appeal No. 1961 of 2020 (Arising out of SLP (C) No 28165 of 2018)
Decided on : 04-03-2020
(a) Interpretation of statute - Harmonious construction - Two conflicting provisions in a statute should be construed harmoniously - It must be presumed that the legislature did not intend a conflict and a subject-specific provision governs those situations in exclusion to the operation of the general provision. (Para 31)
(b) Act, 1960 - Section 54(3)(a) and (b) - Section 54(3) deals with a class of societies and appointment of deputed cadre officers on cadre posts - Clauses (a) and (b) are specific in their application to only appointment of CEO in Cooperative Banks - Eligibility as per RBI guidelines - In case of default by Cooperative Banks to appoint eligible candidate as CEO Registrar may appoint an eligible officer from the Bank - Legislative intent to vest with Cooperative Banks the power to appoint their CEO - Verba ita sunt intelligenda ut res magis valeat quam pereat. (Para 34, 36)
(c) Act, 1960 - Section 49-E(2) r/w section 54(3)(a) and (b) - Non obstante clause in section 49-E(2) - Notwithstanding insertion of clauses (a) and (b) in section 54(3), CEO of a Central Society falling within the description of Section 49-E(2) has to be appointed from among officers of the cadre maintained under Section 54. (Para 38)
(d) Act, 1960 - Section 49-E(2) r/w section 54(3)(a) and (b) - notification dated 12 January 1971 issued by State Government - Harmonious construction - To hold that clauses (a) and (b) vest in Cooperative Banks which are Central Societies falling within the ambit of Section 49-E(2) the overriding power to appoint their CEO would render the provision inoperative - Such interpretation would defeat the salient purpose of ensuring the regulatory control of the State Government over Societies to which it has made a financial contribution - On the other hand, to hold that a Cooperative Bank which is a Central Society within the ambit of Section 49-E(2) must accept and appoint the cadre officer deputed by the Apex Society, defeats the special provision inserted for Cooperative Banks in clauses (a) and (b) of Section 54(3). (Para 40)
(e) Act 1960 - Section 54(3)(a) and (b) empowering Cooperative Banks to appoint their CEO does not apply to Cooperative Banks that are Central Societies within the ambit of Section 49-E(2) - State Government held empowered to issue a notification under Section 54(3) for Cooperative Banks which are Central Societies falling within the ambit of Section 49-E(2) specifying that the Cooperative Bank shall appoint its CEO from the cadre constituted by the Apex Society - The notified Apex Society shall forward to the concerned Cooperative Bank a panel of officers from which the it shall appoint its CEO, subject to the officer satisfying the eligibility criteria prescribed by the RBI. (Para 45)
Facts of the case:
The appellant - Chhattisgarh State Cooperative Bank - is the apex body of cooperative banks in the State of Chhattisgarh. The first respondent is a District Central Cooperative Bank which is governed by the provisions of the Chhattisgarh Co-Operative Societies Act I960.
The seventh respondent was appointed as an interim CEO, following suspension of the then CEO, by the Chairperson of the first respondent, pending a formal decision by the Board of Directors. Thereafter the appellant appointed the sixth respondent as the CEO of the first respondent.
The BoD of the first respondent approved the appointment of the seventh respondent, the interim CEO, as the CEO. The first respondent instituted a Writ Petition before the High Court of Chhattisgarh challenging the legality of the order by which the appellant had appointed the sixth respondent as the CEO.
The BoD of the first respondent resolved to accept the appointment of the sixth respondent and directed that the seventh respondent shall hand over charge of the post of the CEO to the sixth respondent.
A Single Judge of the Chhattisgarh High Court dismissed the Writ Petition filed by the first respondent.
The Division Bench allowed the LPA.
Finding of the Court:
The action of the first respondent in seeking to appoint the seventh respondent as the CEO is not sustainable in law.
Result: Appeal allowed.
Key Points: - The Supreme Court held that Clauses (a) and (b) of Section 54(3) are special provisions for appointment of CEO in Cooperative Banks, allowing Bank appointment from RBI-eligible cadre while requiring compliance with RBI eligibility (!) (!) (!) - For Central Societies falling under Section 49-E(2), the CEO must be appointed from the cadre maintained under Section 54 if such a cadre exists, with State Government notifications guiding appointment from Apex cadre and panel forwarding by Apex Society (!) (!) (!) - The State Government can issue a Section 54(3) notification to designate class of societies to employ cadres from Apex/Central cadres, but cooperative banks get a carve-out for CEO appointment from their own cadre under special provisions (!) (!) - The 2016 Amendment inserted a RBI-eligibility criterion and Registrar appointment fallback if the bank fails to appoint within a specified period; these are to be harmonized with pre-existing 49-E(2) regulations, not to override them (!) (!) (!) - The Division Bench’s interpretation that Apex Body had no role was reversed; the Court held Apex/Cadre mechanism remains operative with CEO appointment from cadre and panel forwarding, ensuring regulatory control by the State Government over Central Societies with state funds (!) (!) - The case clarifies that the 54(3) framework excludes Cooperative Banks for broad delegation but provides a mechanism for Central Societies under 49-E(2) to appoint from cadre or via Registrar when Cadre is absent (!) (!) - The appeal is allowed; the appointment of the sixth respondent from the Apex cadre was validated; the seventh respondent’s appointment was set aside as not from cadre (!) - The Registrar’s ratification and BoD acceptance of the sixth respondent’s appointment were upheld under the applicable statutory scheme (!)
JUDGMENT :
Dr Dhananjaya Y Chandrachud, J.
This appeal has arisen from a judgment of a Division Bench of the High Court of Chhattisgarh dated 7 August 2018. Allowing a Letters Patent Appeal, the Division Bench set aside the judgment of a Single Judge dated 19 January 2018. The Division Bench held that the appointment made by the appellant on 11 August 2017 of the Chief Executive Officer ["CEO"] of the first respondent bank and its subsequent ratification by the Registrar of Cooperative Societies, were without the authority of law. Consequently, the decision of the appellant was held to be not binding on the first respondent.
2. The appellant - Chhattisgarh State Cooperative Bank - is the apex body of cooperative banks in the State of Chhattisgarh. The first respondent is a District Central Cooperative Bank which is governed by the provisions of the Chhattisgarh Co-Operative Societies Act I960 ["1960 Act"].
3. The CEO of the first respondent bank was arrested on 9 August 2017 by the Economic Offences Wing of the State of Chhattisgarh on charges of corruption, under the Prevention of Corruption Act 1988 ["PC Act"]. Upon being produced before the designated Court, he was remanded to custody and placed under suspension from his office of the CEO.
4. On 10 August 2017, the seventh respondent was appointed as an interim CEO by the Chairperson of the first respondent, pending a formal decision by the Board of Directors [BoD"]. On 11 August 2017, the appellant appointed the sixth respondent, who was discharging duties as a 'Special Class Managing Director' at Raipur, as the CEO of the first respondent. The appellant purported to take this action as the first respondent had been appointed an interim CEO and the person appointed did not fulfill the eligibility criteria prescribed by the Reserve Bank of India ["RBI"]. The appellant also sought to justify its action of appointing the sixth respondent as the CEO of the first respondent with reference to Section 54(3) of the 1960 Act.
5. The sixth respondent was not given charge as the CEO of the first respondent on the ground that a meeting of the BoD was scheduled to be convened on 16 August 2017. On 16 August 2017, the BoD of the first respondent approved the appointment of the seventh respondent, who was initially serving as the interim CEO, as the CEO. The first respondent instituted a Writ Petition [W.P(C) 3875 of 2017] before the High Court of Chhattisgarh challenging the legality of the order dated 11 August 2017, by which the appellant had appointed the sixth respondent as the CEO. Essentially, the case of the first respondent is that the appointment of its CEO lies solely within its discretion and neither the appellant as the apex society nor the Registrar has the power to appoint a CEO. The BoD of the first respondent bank sought a clarification from the Registrar of Cooperative Societies on 17 August 2017 regarding the appointment of the sixth respondent as the CEO. By his communication dated 21 August 2017, the Registrar stated that the appointment made by the appellant of the sixth respondent was in accordance with law and that the order of appointment should be complied with.
6. On 25 August 2017, the BoD of the first respondent resolved to accept the appointment of the sixth respondent and directed that the seventh respondent shall hand over charge of the post of the CEO to the sixth respondent.
7. A learned Single Judge of the Chhattisgarh High Court by a judgment dated 19 January 2018 dismissed the Writ Petition filed by the first respondent holding that the appointment of the sixth respondent was in terms of the provisions of Section 54(3) of the 1960 Act and was legally sustainable. The Single Judge also noted that the appointment had been ratified by the Registrar of Cooperative Societies and that the appointment had also been accepted at a meeting of the BoD of the first r
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